Effect of Rs. 500 / 1000 note ban on the Indian car industry

This is a discussion on Effect of Rs. 500 / 1000 note ban on the Indian car industry within The Indian Car Scene, part of the BHP India category; I generally feel people are more afraid now and will be even more careful with their money. This alone is ...

I generally feel people are more afraid now and will be even more careful with their money. This alone is a reason for people to stop purchasing luxurious things ( like cars for eg ) that they don't really need for the time being till everything cools down.

It's a known fact that any lavish spending will trigger attention from the IT department towards oneself currently.

As far as losses to illegal wealth due to this, honestly it's not a major dent for most as they have all found loopholes to convert their ill-wealth to white.

Infact to be quite honest, I can see actual rise in black money right now. For eg. there are agents/people who charge 100 Rs for every 1000 Rs ( old notes )that people want changed to other denominations ( like 100 Rs / 50 Rs / 10 Rs ). Even worst, there are banks that are offering to accept the old notes in exchange for new ones or lower denominations for a charge of 25%-35%.

So much for the surgical strike on Black money. Car market will slump for a few months. Expect it to come booming up after that with all the black money back in market again.

The problem is that legal/white money has to be used to buy new cars, and all living expenses must have been paid through cash. Now if you don't cash, even living expenses will need to be extracted from legal money, thereby creating a shortage

Apart from cars, I feel the accessories market is going to take a bigger hit. My understanding is that his market is fully cash based, and none of the shop owners would be paying anywhere close to the tax that they actually owe!

Of course, this can create issues for "other things"! But not for anyone that is entirely honest in ALL his other things. Including on the date of the agreement and delivery. For an honest citizen, there is no need to be dishonest with these even for December 2016 transactions.

Yes there may be a letter from the IT, but I have found that if you given them a clear and complete reply, that is the end of the matter these days - if your past IT records prove your honesty.

The problem is the arbitrary, i.e., WITHOUT any due process of law whatsoever i.e., by 'Fiat' nature of de-monetisation. Money is NOT by-fiat but by 'trust and confidence and circulation and velocity etc etc.'

So: neither can de-monetisation be by arbitrary fiat.

In other words, in a fell swoop the 'trust' that 'the honest' will indeed be treated as such, or that the 'authorities' are bona fide i.e., impersonal and dis-interested, without ulterior motives, with and by the social-legal-contract has been destroyed.

The 'thing' being of course that there are very very few folks who are not white<---->black=grey=debatable=harassable=single-outable, whether by law or by 'other market participants' or by 'protection racketeers' etc.

In fact imo such unicorns do not exist in India at least. They may think they are such unicorns and hence 'immune' but no: it's an impossibility, a priori. The property value of a 'white money'-financed, all-above-board flat has crashed and will stay crashed all else being equal, ergo it is AS IF the owner too is, at best: grey, de facto, even though he thought he was 'white'.

THAT corrodes 'confidence' that 'the sovereign' must implicitly or explicitly provide as an underpinning for monetary transactions: 'i PROMISE to pay the bearer.....' The numerous perfectly arbitrary winners-with-no-effort and losers-not-at-prima facie-fault through de-monetisation destroys the underlying trust/morality-of-exchange, whether that exchange is by cash (which is not black: blackness has nothing whatsoever to do with whether it is 'by cash' or 'via banking channels', most 'black money' is in fact 'grey' floated more or indeed a little-less-unimpeded in and out of the 'formal banking sector' the 'formal'-ness of which, too, is of considerable doubt in the first place, in practice!) or not.

i.e., de- and re-monetisation-by-Fiat is a weapon of monetary mass destruction that causes deep short AND long term collateral damages, the greatest of which is trust-confidence-in-the-sovereign and its 'promissory notes' or 'promise to uphold and underwrite contracts and protect pre-defined property rights', which is why it has never in history been deployed by any country other than a few basket-cases in Africa and Latin America suffering for example from hyper-inflation and the like. It is a 'socialist'/'maoist'-style expropriation by arbitrary sovereign fiat, unmediated by any laws or its 'reasonable' arbiters (courts).

The 'new normal' will, all else being equal, take a long time coming (forget about a mere 3-6 months) and it will be a much lower 'normal', which is to say: quite-permanently 'abnormal'! Suffering another, new type of structural 'Nervous monetrary/political-economy Dis-Order' to add to the 'pre-existing conditions' one might say.

I hope it goes well-enough though now that it hasbeen done for whatever reasons and logics: not TOO badly, that is, as it is worked out and worked-through.

The problem is that legal/white money has to be used to buy new cars, and all living expenses must have been paid through cash. Now if you don't cash, even living expenses will need to be extracted from legal money, thereby creating a shortage

Hit the nail on that head, that. I think this is good summary that explains all the shrinking in the economic activity that will happen in the country now, including a reduction in the GDP growth in the short term, along with deflation.

I agree with many points above. Paper currency cannot be trusted. Temporary reduction in inflation and land prices will follow. Interest rates may be cut by 1-1.5% to boost economy so stock market in for good days. Cars will sell more due to cheaper loans. Bikes/scooters will sell more in cash as PAN not required there. Cash is being "rotated" with 30% cuts/losses for previous owners. The micro-lending business is practically finished (interest based cash is being returned in full to lenders). Jewellers who didn't use voluntary disclosure earlier in for a tough time. Gold as an investment will become questionable. Land will still remain the best investment to park cash (although value will reduce).

Small retailers are ruined. People who ran away from home leaving everything behind are ruined. Hijras are nowhere to be seen. Factories seeing unrest as workers cant get paid.

White collar people and middle class is happy. Equity investors are getting great deals. Middlemen agri traders are very happy (making a killing on filling cash in hand).

Life.goes.on!

Last edited by GTO : 13th November 2016 at 19:48.
Reason: STRICTLY no political discussions on Team-BHP please.

Will the price of Baleno be reduced due to demonetisation? I booked my Baleno Zeta CVT in August and will be getting the delivery in a couple of weeks now. Is it wise to postpone my purchase or should I go ahead with the delivery?

Will the price of Baleno be reduced due to demonetisation? I booked my Baleno Zeta CVT in August and will be getting the delivery in a couple of weeks now. Is it wise to postpone my purchase or should I go ahead with the delivery?

While I doubt you will see any reduction in the ex-showroom price *officially*, you may get the car early if people ahead of you in the queue start cancelling. Maybe you can negotiate for a few freebies too.

Will the price of Baleno be reduced due to demonetisation? I booked my Baleno Zeta CVT in August and will be getting the delivery in a couple of weeks now. Is it wise to postpone my purchase or should I go ahead with the delivery?

Very doubtful for reasons mentioned in this thread.

It may impact the price if the vehicle was a pre-owned purchase, but not for a new car (as very very few people actually buy a car with black money, even lesser after the TCS rule was implemented earlier this year).

At best, you can hope that sales slow down (as people are more concerned about meeting their daily expenses than buying a new car at the moment), and you'll be given a small discount - but this is unlikely in the case of a fast selling popular vehicle that commands a waiting period (a la Baleno CVT).

We recently sold our car for 1.4 Lakhs before the notes ban. New owner of the car gave us hard cash. What should we do now?
1. What is the tax treatment on sale of a car?
2. Is there any VAT payable in Maharashtra?
Please help!

^^^ Did you issue a receipt and have a signed delivery note that the vehicle has been handed over? Deposit the cash at the bank; in any case, its well below the 2.5 l limit beyond which they start scrutinizing. And even if they do, if you have done the paperwork you are fine.

any idea about impact on Small neighbourhood hole in the wall type garages? they are mostly cash, and paying them might be tough.
One thing is that they might now ask us to buy parts directly, or even change their payment models entirely - become like accessories installers where the installation cost is built into the margins, and may be billed separately/directly.

Or will like smaller retailers and sellers, they get killed by larger multi brand workshops with card machines & professional management?

^^^ Did you issue a receipt and have a signed delivery note that the vehicle has been handed over? .......
Do not think there is any VAT payable for selling a used car

Thanks for your reply. As of now the vehicle is still on my name & all the paperwork is pending. So, if we issue a receipt and get a signed delivery note then we can show it as a proof? I am sorry but I am really dumb in tax & money matters
FYI The new owner is a family friend.